Blackstone targets at least $3 billion for new real estate secondaries fund

What Blackstone is pitching

Blackstone is courting investors for a fund designed to purchase positions in other asset managers' real estate funds. The target is no less than $3 billion, according to people familiar with the plan who asked not to be named because the effort is not public. A Blackstone representative declined to comment.

Those people said the vehicle will concentrate on core real estate funds and seek out exposure to strategies heavy on data centers, rental housing, and industrial properties. The intent is to buy those interests at prices below the funds' stated net asset values.

Why liquidity is the hook

In 2023, Strategic Partners - Blackstone's secondary business - raised $2.6 billion for an earlier version of this strategy. Executives linked that fundraising to growing liquidity pressures felt by asset managers and their limited partners, the investors who back private funds. The latest pitch looks to meet similar liquidity needs by creating a buyer for fund stakes when sellers want out.

The backdrop for secondaries

The broader U.S. real estate market has taken repeated hits, from the pandemic's blow to offices to the Federal Reserve's rate hikes that began in 2022, which cooled deal activity. Blackstone's real estate arm is still working through the damage from that stretch.

That slowdown has pushed more action into the secondary market. Ares Management reported that manager-led real estate secondary transactions reached $14.5 billion last year, an increase of 60 percent from the prior year. The same report said volumes could roughly double in the coming years.

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Where continuation funds fit in

Continuation vehicles - arrangements that transfer current holdings into a freshly formed vehicle while bringing in additional capital - are gaining traction with real estate managers. Jefferies noted that private-asset firms are using them more often to keep marquee holdings in areas like logistics, data centers, and senior housing.

The bottom line: if secondaries and continuation funds keep growing, more liquidity options could surface across private real assets - a trend worth watching for how it reshapes pricing, discounts to NAV, and access points in your portfolio.

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